Just as some credit sources last week began speculating about the future of J. Jill and whether it could be put up for sale, given the bankruptcy filing of its parent in March, Moody’s Investors Service on Monday placed the retailer’s ratings on review for a possible downgrade.

This story first appeared in the July 24, 2012 issue of WWD. Subscribe Today.

About $115 million of rated debt is affected, and there is now the possibility of a default rating.

As reported, Arcapita Bank BSC and five affiliated debtors filed for Chapter 11 bankruptcy court protection in Manhattan. Arcapita is an Islamic wholesale bank owned by the Central Bank of Bahrain. Arcapita, which earlier this month received bankruptcy court approval to hire Alvarez & Marsal North America and Rothschild Inc. as its financial advisers, is still in bankruptcy proceedings.

Arcapita Inc. is a U.S. subsidiary that was formerly known as Crescent Investments, which invests in American firms for between $200 million and $1 billion. It includes among its holdings women’s apparel retailer J. Jill. None of Arcapita’s operating subsidiaries nor its portfolio firms are parties to the filing.

That didn’t stop credit analysts from wondering last week whether J. Jill at some point might be put on the auction block due to the bankruptcy filing of Arcapita.

Moody’s said its reason for the review is because the firm “has not provided audited statements as of Jan. 28, 2012, as required under its loan agreements,” as well as an agreement with lenders stating they would hold off enforcing certain obligations due to some technical defaults under the same lending contracts.

The ratings agency said the review for downgrade will focus on the firm’s ability to obtain a permanent waiver and amendment under its loan agreements, as well as the operating performance of the company.

Private equity firm Golden Gate Capital acquired J. Jill from The Talbots Inc. in 2009, and sold the operation to Arcapita in 2011.

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